Legal Definitions - act of bankruptcy

Definition: An act of bankruptcy is an event that triggers an involuntarybankruptcy proceeding against a debtor. This can include fraudulent conveyance of property, failure to pay debts, or other actions that indicate the debtor is unable to pay their debts.

Example: If a debtor sells their property to a family member for far less than its market value in an attempt to hide assets from creditors, this could be considered an act of bankruptcy. The sale is fraudulent and indicates that the debtor is not acting in good faith to pay their debts.

Explanation: An act of bankruptcy is a serious matter that can lead to involuntary bankruptcy proceedings against a debtor. This means that creditors can force the debtor into bankruptcy, even if they do not want to file for bankruptcy themselves. The examples illustrate how certain actions by a debtor can trigger an involuntary bankruptcy proceeding and the consequences that can result from these actions.